Credit Suisse Suspends Traders

Switzerland's second largest bank says a small number of traders are under investigation for overvaluing asset-backed securities

by the Associated Press

ZURICH, Switzerland—Credit Suisse suspended a number of traders in connection with a $2.85 billion overvaluation of assets.

A spokesman for Switzerland's second largest bank said Tuesday that a small number of traders were under investigation for overvaluing asset-backed securities.

"I can't tell you exactly how many, but a small number, a handful," Credit Suisse spokesman Marc Dosch told The Associated Press.

An internal review found "mismarkings and pricing errors" in the bank's structured credit trading business, which has also been affected by the subprime mortgage crisis and the subsequent downturn in world markets, Credit Suisse said Tuesday.

Shares in the bank dropped 9.2 percent to 51.55 Swiss francs ($47.21) on the Zurich exchange following the announcement that the misvaluation will reduce earnings by $1 billion in the first quarter. The bank said it expects to remain profitable for the quarter even with the write-down.

Credit Suisse last week announced a $1.88 billion write-down for subprime-related assets, but posted fourth-quarter profits of 1.33 billion francs ($1.2 billion).

Rival UBS AG, the largest Swiss bank, has been hit much harder. UBS posted a loss of more than $11 billion for the fourth quarter and its first full-year net loss in a decade after writing down 15.6 billion francs ($13.7 billion; 9 billion euros) in the mortgage-related investments.

The announcement by Credit Suisse raised questions among some analysts about the bank's internal oversight.

"Whilst we had received some assurance that the Credit Suisse balance sheet is not as laden with problem securities as UBS, this disclosure just raised the prospect that they may be simply bad at knowing what problems they do have," Peter Thorne of independent brokerage Helvea SA said.

Many banks have been hit by the subprime crisis, but most have been mum about the effect on this year's earnings.

Credit Suisse's disclosure is part of an ongoing internal probe into how its traders marked the value of products such as commercial mortgage-backed securities, residential mortgage-backed securities, and collateralized debt obligations, or CDOs.

The review's findings will be completed by mid-March, when Credit Suisse is scheduled to publish its annual report, a bank spokesman said.